WASHINGTON (MNI) – The following is the text of a joint statement
by the Bank of Canada, the Bank of England, the Bank of Japan, the
European Central Bank, the Federal Reserve, and the Swiss National Bank
announcing coordinated actions aimed at addressing pressures in the
global money markets. For its part, The Federal Open Market Committee
has authorized an extension of the existing temporary U.S. dollar
liquidity swap arrangements with the Bank of Canada, the Bank of
England, the Bank of Japan, the European Central Bank, and the Swiss
National Bank through February 1, 2013. The rate on these swap
arrangements has been reduced from the U.S. dollar OIS rate plus 100
basis points to the OIS rate plus 50 basis points:
The Bank of Canada, the Bank of England, the Bank of Japan, the
European Central Bank, the Federal Reserve, and the Swiss National Bank
are today announcing coordinated actions to enhance their capacity to
provide liquidity support to the global financial system. The purpose of
these actions is to ease strains in financial markets and thereby
mitigate the effects of such strains on the supply of credit to
households and businesses and so help foster economic activity.
These central banks have agreed to lower the pricing on the
existing temporary U.S. dollar liquidity swap arrangements by 50 basis
points so that the new rate will be the U.S. dollar overnight index swap
(OIS) rate plus 50 basis points. This pricing will be applied to all
operations conducted from December 5, 2011. The authorization of these
swap arrangements has been extended to February 1, 2013. In addition,
the Bank of England, the Bank of Japan, the European Central Bank, and
the Swiss National Bank will continue to offer three-month tenders until
further notice.
As a contingency measure, these central banks have also agreed to
establish temporary bilateral liquidity swap arrangements so that
liquidity can be provided in each jurisdiction in any of their
currencies should market conditions so warrant. At present, there is no
need to offer liquidity in non-domestic currencies other than the U.S.
dollar, but the central banks judge it prudent to make the necessary
arrangements so that liquidity support operations could be put into
place quickly should the need arise. These swap lines are authorized
through February 1, 2013.
Federal Reserve Actions
The Federal Open Market Committee has authorized an extension of
the existing temporary U.S. dollar liquidity swap arrangements with the
Bank of Canada, the Bank of England, the Bank of Japan, the European
Central Bank, and the Swiss National Bank through February 1, 2013. The
rate on these swap arrangements has been reduced from the U.S. dollar
OIS rate plus 100 basis points to the OIS rate plus 50 basis points. In
addition, as a contingency measure, the Federal Open Market Committee
has agreed to establish similar temporary swap arrangements with these
five central banks to provide liquidity in any of their currencies if
necessary. Further details on the revised arrangements will be available
shortly.
U.S. financial institutions currently do not face difficulty
obtaining liquidity in short-term funding markets. However, were
conditions to deteriorate, the Federal Reserve has a range of tools
available to provide an effective liquidity backstop for such
institutions and is prepared to use these tools as needed to support
financial stability and to promote the extension of credit to U.S.
households and businesses.
Information on Related Actions Being Taken by Other Central Banks
Information on the actions to be taken by other central banks is
available on the following websites:
Bank of Canada: www.bankofcanada.ca
Bank of England: www.bankofengland.co.uk/
Bank of Japan: www.boj.or.jp/en
European Central Bank: www.ecb.int
Swiss National Bank: www.snb.ch
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** Market News International Washington Bureau: 202-371-2121 **
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